Scenario Analysis

Scenario Description

A scenario is a story or story outline. Thinking about the future normally involves creating alternative scenarios, or stories, about the possible interactive evolution of variables. Some such scenarios are exploratory and consider the possible unfolding of different futures around key uncertainties, such as the rate of some aspect of technological advance or the fragility of some element in the global environment. Other scenarios are normative and develop stories about preferred futures, such as a global transformation to sustainability.

Scenarios in a computer model typically are built from multiple interventions that collectively help create a coherent story about the future. Often, but somewhat imprecisely, the word scenario is used more loosely to refer to any intervention (such as the change of a fertility rate for a country or an alternative assumption about oil resources).

Scenarios or interventions with respect to what? When IFs or other computer simulations are "run", without making any changes to parameters or initial conditions specified as the default values, they generate a forecast that is typically called the Base Case. The IFs Base Case, always available when a model session is initiated, is itself a scenario. Sometimes the Base Case is incorrectly referred to as a trend extrapolation or a "business as usual" scenario. More accurately, however, the IFs Base Case is a computation that involves the full dynamics of the model and therefore has very nonlinear behavior, often quite different from trends. It is a good starting point for scenario analysis for two reasons. First, it is built from initial conditions of all variables and on parameters that have been given reasonable values from data or other analysis. These initial conditions and parameters make up the package of interventions that constitute the Base Case scenario. Second, the Base Case is periodically analyzed relative to the forecasts of many other projects across the range of issue areas covered by IFs and is to a degree "tuned" for internal coherence and consistency with insights of respected forecasters.

There are two file types involved in IFs scenario creation: scenario files (or Scenario-Load-Files) and run files (or Run-Result-Files). Scenario files, the first type, are saved with an extension of .sce. Very small in size, .sce files contain information that the IFs model uses to create alternative scenarios; i.e., .sce files contain a list of parameter values that diverge from the Base Case. It is important to note that scenario files do not contain any forecasts. Forecasts are generated and saved only in the second type of file, run files with the .run extension. Because they contain forecasts of all IFs variables and parameters, .run files are much larger than scenario files. Although the IFs standalone model software allows users to save both types of files, web users are only able to save .sce files to retrieve their parameters and regenerate their scenarios.

In addition to the Base Case, most versions of IFs will include a number of other previously-run scenarios (see Lesson 0: IFs Vocabulary for additional important terminology), typically those for the Global Environmental Outlook (GEO) of the United Nations Environmental Program (UNEP). If you look, for instance, at the Flexible Displays form, you will see a list of previously-run scenarios in the box at the bottom of the screen. Because those have already been run, based on a set of interventions constituting their foundations, the user can immediately display their results.

Quick Scenario Analysis with Tree Overview

Overview

What is a scenario?

This section of the Help Menu will guide you through the task of changing parameters and variables and creating Scenario-Load-Files/Run-Result-Files.

After you have finished with this topic, you should be able to answer/do the following:

• What is the difference between a Scenario-Load-File and a Run-Result-File?
• What Previously-Run-Scenarios came installed in your version of IFs?
• What is a scenario? What is not a scenario?

Introduction to the Scenario Tree:

The scenario tree allows you to call up or to mix and match an extensive number of your own interventions and/or a set of stored scenario intervention files. This feature of IFs allows you to change any parameter or initial condition used in the software for any country/region or group that you choose, thus effecting the relationships used to forecast trends. Use the Quick Scenario Analysis with Tree to create Scenario-Load-Files, run these files through IFs in order to create Run-Result-Files that you can use throughout IFs.

Below is the menu:

IMAGEhttp://www.du.edu/ifs/help/use/scenario/quick/quicktree.html

Loading Previously-Run Scenarios and Previously-Structured Scenarios

From the Scenario Files menu, you can clear your scenario tree, load Scenario-Load-Files or save your current Scenario-Load-File (.sce).

After you have finished with this topic, you should be able to do/answer the following:

• How do you clear parameter changes from the scenario tree?
• How do you find scenario files that are not used as Run-Result-Files?
• What do you have to click on to understand exactly what is being changed by different previously-run scenarios and previously-structured scenarios? 

Adding Scenario Components and Other Previously Structured Scenarios

Another feature of the Quick Scenario Analysis with Tree is the ability to add other scenario components. These previously-structured or previously-run scenarios are helpful ways to look at possible emerging global trends.

After you have finished with this topic, you should be able to do/answer the following:

• What does the Annotate Scenario option tell you?
• Search through the scenarios until you find one that takes deals with environmental change.
• Load a Scenario Component and return to the Scenario Tree.

Finding the Intervention You Want

In order to tailor your Run-Result-File to your needs, you must be able to quickly find the parameter you are looking for.

After you have finished with this topic, you should be able to do/answer the following:

• What is the organizational logic of the tree?
• Where would you look if you wanted to find a parameter by typing into a search menu?
• What is the difference between the Selected Initial Conditions/Relationship Parameters and the other five main categories used in the Scenario Tree?

Exploring and Changing Parameters

Once you have found the parameter you are looking for, say, the Total Fertility Rate Multiplier (Households/Individuals, Demographic/Population, TFRM), a number of new options become available.

After you have finished with this topic, you should be able to do/answer the following:

• How do you select a parameter to change?
• What does multiplier mean?
• What do the select, drivers, explain, view equations and define options all allow you to do?
• How do you create a Run-Result-File?
• How do you save the results?
• How can you display the results of you change in IFs?

Previously-Run and Previously-Structured Scenarios

The following description of Previously-Run Scenarios and Previously-Structured will be based on the Quick Scenario Analysis with Tree option found under the Scenario Analysis option on the Main Menu of IFs.

To load Previously-Run Scenarios and Previously-Structured Scenarios, you must start by clicking on the Scenario Files menu option in the Main Menu of Quick Scenario Analysis with Tree.

If you would like to clear any changes to the parameter tree, click on New and decide whether or not you would like to save your current scenario. In order to load a previously-run scenario, click on the Open option and then scroll over to the scenario that you would like to load. Below is an image of some possible previously-run scenarios that can be loaded:

http://www.du.edu/ifs/help/use/scenario/quick/previously.html image

If you choose one of these previously-run scenarios, your parameter tree will change corresponding to the conditions of that file. To know what parameters were changed by the previously-run scenario, load the scenario and then click on Annotate Scenario at the top of the menu. This will access a brief description of the previously-run scenario along with a detailed list of all parameters that were changed.

From the Scenario Files menu, you can also add other previously-run scenarios that are not loaded into IFs, but that are saved in other files. Click on Add from the Scenario Files menu and you will be presented with a menu with a number of different previously-run scenarios that can be loaded into your parameter tree.

http://www.du.edu/ifs/help/use/scenario/quick/previously.html image

Click on one of the Scenario-Load-Files and you will be asked whether you want to load the .sce file. Click Yes and the parameter changes will be loaded into your parameter tree. Click on Annotate Scenario to see what parameters were changed.

From the Scenario Files menu, you can also save any of your scenario files. Simply click on Name and Save from the Scenario Files menu and you will be asked to choose where you would like to save your scenario and under what name. Note that these files are saved as .sce. Turning a file into a .run file requires you to run the model.

Adding Scenario Components

From the Main Menu of Quick Scenario Analysis with Tree, click on Add Scenario Components and you will be presented with another menu. When you click on the + arrows on the left, sub-categories open. The image below shows what happens when you click on the + next to the World Integrated Scenario Sets and then the + next to the UNEP Geo sub-category. Any of the below previously-structured scenarios can be loaded into IFs. Simply click on the scenario and then, at the top of the screen, on Load. If you would like to know more about each previously-structured scenario, load the scenario and then click on Annotate Scenario.

Change Selected Functions

Variables are forecast based on mathematic relationships that are represented by functions within IFs. These functions can be changed by users based on different understandings of relationships between variables. Users of IFs can change relationships between two variables or multiple variables . Follow the links below to learn more about how to change these relationships.

Bivariate Functions

Begin at the Main Menu of IFs. Choose the Change Selected Functions option under Scenario Analysis. Then choose the Bivariate Functions sub-option. That will give you the Change Bi-Variate Functions window, below.

IMAGE http://www.du.edu/ifs/help/use-online/scenario/change/bivariate.html

To see the full list of functions or relationships that you can change in IFs, check Extend List. Click on any of the function names (relationships) in the Functions list box in order to see the relationship already in IFs. When you click a graphic of the function will be displayed in the lower right of the window. Many of the functions will also display the r-squared and standard error (SE) that indicate the strength of the relationship that we found when creating it via cross-sectional analysis of our database.

Our creation of the functions was sometimes to use in computations of the model run from the base year, sometimes to be used in the historical run, and sometimes in the model's data preprocessor to fill holes and clean up data (again, for either historical forecasts or those looking forward). The options in the upper right are all checked by default, but if you wanted to see only those functions used in the model run, you could turn off all of the other checks. This window actually gives you the opportunity to revise the functions used in the model run.

There are two ways to specify (and therefore also to change) relationships in IFs. The first is called a "table function." Table functions allow you to specify two or more points in a relationship and let IFs connect those points with lines to create the relationship. This is a very simple process because you need not understand equations; but it also allows the creation of complex functions. The second is via "analytic functions" or equations. Look at each in turn.

Option A for Specifying Relationships: Table Functions. Click on the "A Function to Play With" relationship so that you can do just that. In the Table Function Points frame, you see boxes for specifying new or changing old X-axis and Y-axis values. Let's start by adding a point to the five that already make up the table function. Specify 7 as the X-axis value and 8 as the Y-axis value. Touch the Add button and the point will be added, creating a relationship between X and Y that increases to a point and then starts down. Try specifying 1 as the X-axis value and 8 as the Y-axis value, then touching the Alter button. Now you have a relationship that starts downward, climbs, and then drops. Table functions give you nearly unlimited control over the form of a relationship. You can always touch Reverse Changes to return to the original form. As it says, play around.

Option B for Specifying Relationships: Analytic Functions (Equations). Click again on the "A Function to Play With" relationship. This time, however, touch the Analytic Function button in the lower left to call up the following screen.

IMAGE http://www.du.edu/ifs/help/use-online/scenario/change/bivariate.html

If you do not understand equations, you may want to skip this part of the lesson – table functions can serve you well. But you can create a simple analytical function by specifying the constant (a) as 20 and the logarithmic parameter (b4) as 3. Leave the other parameters at 0. Note that by selectively specifying various parameters you can create a wide variety of analytic functions (including most of those that Excel will create when you fit lines to scatter plots). You may also specify the lower and upper range over which you will allow the independent variable to vary. For instance, you may not want the independent variable to be negative.

Save and Continue returns you to the Change Functions window and displays the analytic form you have specified. Note that the function you have created looks much like the one that Excel fit to the relationship between GDP per capita and life expectancy in Lesson 4 . You now have the capability of discovering relationships and good analytic representations of them using the cross-section analysis capability of IFs or Excel with the IFs database or Excel and then taking those relationships into IFs itself.

When you Exit from the Change Functions window, IFs gives you a very important informational warning. If you have made any changes to functions, those will remain active only until you exit from IFs. Starting IFs again resets all functions to standard values. Moreover, although runs of the model that you make with altered functions will reflect your changes, no information about the changed functions is saved with the .RUN files. You must keep track of the changes you make in functions.

After you have changed one or more functions, you can run the model and create a new working file that reflects the changed functions and their impact on all computations in IFs. You can compare that working file (or a saved version of it) with the Base Case or with other scenarios.

Multivariate Functions

Begin at the Main Menu of IFs. Choose the Change Selected Functions option under Scenario Analysis. Then choose the Multivariate Functions sub-option. That will give you the Change Multi-Variate Functions window, below.

IMAGE http://www.du.edu/ifs/help/use-online/scenario/change/multivariate.html

Our creation of the functions was most often to use in computations of the model run from the base year, sometimes to be used in the historical run, and sometimes in the model's data preprocessor to fill holes and clean up data (again, for either historical forecasts or those looking forward). The options in the upper right are all checked by default, but if you wanted to see only those functions used in the model run, you could turn off all of the other checks. This form actually gives you the opportunity to revise the functions used in the model run.

The form has two grids. The first grid on the default page shows a list of all multivariate functions in the model. When you select one of the functions in the first grid, the second grid will show up, which shows the independent variables and parameters in the particular function you have chosen.

• Intercepts: Change the intercept value for the function by left-clicking on the value in the intercept cell of the function of interest (the intercept cell is just to the right of the name of the dependent variable).
• Other Parameters: Change parameters associated with specific independent variables for a selected function by clicking on the appropriate cell and changing values as desired. The general function at the top of the form explains the meaning of each possible parameter for independent variables. For instance, b1 is the parameter and would be used to identify a linear relationship of the independent and dependent variables. Normally, of course, most parameters will be zero (or null which means 0).

Changing functions gives you a powerful tool for using IFs to investigate possible futures. To an extent, it allows you to change the model itself.

Running Working Scenario

The Run option can be found by selecting Scenario Analysis from the Main Menu.

Use this IFs option if you would like to take a Working File to which you have made scenario changes (see the topic on Quick Scenario Analysis with Tree and run it so that all of the variables of IFs are recomputed. It is important to remember that scenario changes of parameters or initial conditions by themselves do not affect the forecasted variables of IFs. It requires a run of the model to do those computations. When the run is completed after parameter changes, the forecast variables of the Working File will have been completely changed.

Entering this form directly from the Main Menu is actually not the most common path. Typically, users will change parameters in the Quick Scenario Tree and use the Run option from that form. It will also take them to this form for Running (the) Working Scenario.

On this form you can specify for how many years IFs should run. Choose the year in which you would like the run to stop and then click Start Run.

IMAGE http://www.du.edu/ifs/help/use-online/scenario/run.html

Reload the Base

When you have used the scenario tree (see Quick Analysis with Scenario Tree) to build a scenario via parameter changes or to load a pre-existing set of parameter changes (an .sce file) and then run the scenario to generate a run or results file, the Working File will hold the contents of that model run. It will therefore be different from the Base Case, to which it is automatically set every time you start IFs again. Should you wish to reset the Working File to the Base Case in a session of work with IFs, simply use the Reload the Base sub-option under the Scenario Analysis option of the Main Menu.